No to privatization of eletrobras

Brazil needs many investments in the expansion of the electric system. Everything indicates that the privatization of Eletrobras will mean the delivery of the Brazilian electric sector to foreign capital. Once privatized and denationalized, it is quite possible that the labor and equipment destined for Eletrobras are imported from foreign countries to operate the system. This process will certainly result in the scrapping of the Brazilian electrical equipment industry, in addition to the precariousness of working conditions and the rise in long-term unemployment rates. No to privatization of Eletrobras.

No to privatization of eletrobras

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NO TO PRIVATIZATION OF ELETROBRAS
Fernando Alcoforado *
For many years, notably those prior to the 1990s, Brazil has experienced what can be
called the state monopoly of the electric sector. That is, it was the responsibility of the
state-owned companies with virtually the exclusive production, transmission and
distribution of electricity. However, from the beginning of the 1990s, there was a
substantial transformation with the privatization policy of the electricity sector. This
privatization process began during the Fernando Collor administration with the adoption
of the neoliberal economic model, but extended by the subsequent governments of
Itamar Franco and Fernando Henrique Cardoso. This process took place through the
guidelines drawn up by the National Privatization Plan (PND), which aimed to transfer
the management of activities to the private sector based on the premise that the public
sector did not act efficiently.
Almost 20 years have passed since the beginning of privatizations of electricity
distributors, the balance of what has been promised and what is really happening in the
country, shows the existence of many failures in electricity supply in several regions of
Brazil. Since then, the distribution of electricity has been operated by the private sector.
The distributors manage the concession areas with the obligation to maintain, expand
and provide adequate infrastructure, and its revenue comes from the collection of tariffs
from its customers. The promises that the private sector would bring improvements in
the quality of services and the adoption of affordable tariffs for all citizens were
misleading promises. The practice has not demonstrated that the management of the
electricity sector by private companies is superior to that of public companies. Since
2006, the majority of companies in the sector have shown a declining trend in service
quality indicators due to their deterioration, reflecting negatively on the consumer.
The Michel Temer government announced a few months ago, in a decision that
surprised the market, the privatization of Eletrobras, a giant formed by hundreds of
companies that operate in all three phases of the electric power industry (production,
transmission and distribution of electricity). There are 233 power generation plants,
including Furnas - which operates 12 hydroelectric and two thermoelectric plants - and
the S�o Francisco Hydroelectric Company (Chesf), in addition to six distributors, all in
the North and Northeast, and 61 thousand kilometers of transmission lines, half of the
total of the country and enough to give a return and a half on the planet. The Angra
nuclear power plants will also be excluded from the privatization, since the Constitution
provides that only the state is its controller, and Itaipu, which also belongs to Paraguay.
The privatization plan of the government is to reduce this participation by issuing new
shares.
Today, the federal government holds 60% of Eletrobras' shares. The Union owns 41%
and the National Bank for Economic and Social Development (BNDES), along with its
participation arm, BNDESPar, of another 19%. With a greater volume of shares, the
public sector slice would be diluted and the company capitalized. According to the
government, the privatization model would try to keep control of the company from
being in the hands of only one group, but this is a risk that can not yet be ruled out.
Having 30% of the country's potential for generating electricity, such as Eletrobras, in a

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few hands could cause the controlling group to become a price maker, that is, with
capacity to determine energy prices.
The energy bill will become more expensive with the privatization of Eletrobras. The
National Electric Energy Agency (Aneel) estimates that there may be up to 16.7%
increase in energy bills. The main reason is the planned change to the regime of
commercialization of the energy produced by the Eletrobras plants, the so-called
"descotiza��o". The "descotiza��o", discussed before the privatization, through a
consultation that the Ministry of Mines and Energy launched in July to discuss changes
in the regulatory framework of the sector, provides for the payment of a bonus to the
Union - the R $ 20 billion that the government hopes to raise with the privatization and
that would be paid with the issuance of shares of the company.
It should be noted that in the last 60 years Eletrobras invested approximately R$ 400
billion in the construction of power plants, transmission lines and substations. Not
counting the amount of 40 billion, already ratified, referring to the compensation for the
Basic Network of Existing Systems (RBSE) that the group will receive until 2025.
However, it was announced that the government will "raise" around R$ 20 billion with
privatization, which is a substantial amount lower than the R$ 400 billion already
invested. In addition to intending to sell Eletrobras for a price that is extremely below
the real value, contrary to what the Temer government says, Eletrobras is a company
that contributes positively to the primary result of the government. In the last 10 years,
including in this calculation the rare years of loss, Eletrobras paid directly and
indirectly, approximately R$ 13 billion. That is, in the aggregate, Eletrobras contributed
positively to the primary result of the federal government, having, at various times, paid
much more than the 25% of minimum dividends determined by Law.
These data are sufficient to demonstrate that, in the medium and long term, the
privatization of Eletrobras is very bad for Brazil, in addition to being a crime against the
motherland. One of the arguments of the government is that the sale of Eletrobras would
serve to reduce the primary deficit. The value of the sale shows little relevance near the
forecast of nominal and primary deficit of 450 billion and 157 billion reais, respectively.
The Temer government, therefore, works to sell the state-owned company for a price
much lower than its real value and the resources obtained will not reduce the primary
deficit. The Michel Temer government insists on the privatization that, if implemented,
will promote the delivery of strategic public equity at a banana price, paralyze
investments in the electricity sector, increase electricity prices, and increase the risk of
electricity rationing.
It is important to note that the Eletrobras System is the largest business conglomerate of
clean energy in Latin America, composed of 16 companies in the segments of
generation, transmission and distribution of electricity. Eletrobras has 47 hydroelectric
plants, that is, 47 dams whose management is a matter of national security, without ever
having had an accident. Eletrobras is responsible for 30% of the generation, 50% of the
transmission and 50% of the storable energy (water management and reservoirs) in
Brazil. This percentage is huge compared to other companies. It is clear that control of
such a package by a private company can cause a strong market imbalance, with a great
risk of operational manipulation and of the price of energy.
It should be emphasized that Eletrobras has been the main player in the expansion of the
Brazilian electricity system, promoting the development of all regions of the country.

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Contrary to the assertion that Eletrobras is inefficient, its subsidiaries have presented the
best operating indicators in the market with a high level of availability of transmission
and generation that guarantee the supply of electricity with quality. In cases of weather
disasters, with the occurrence of transmission tower outages, Eletrobras has contingency
plans that reconstruct the lines in record time, which is not financially attractive to the
company, but is very important for the national interconnected system. What is the
probability that this position will be kept in the hands of a private company that will
control Eletrobras? In addition, the company sells subsidized energy to the consumer,
which favors the low tariff. Will this situation also persist with Eletrobras in the hands
of private capital? The answer is no.
Brazil needs many investments in the expansion of the electric system. In recent years,
the growth in electricity supply was on average 2% higher than GDP growth.
Everything indicates that the privatization of Eletrobras will mean the delivery of the
Brazilian electric sector to foreign capital. Once privatized and denationalized, it is quite
possible that the labor and equipment destined for Eletrobras are imported from foreign
countries to operate the system. This process will certainly result in the scrapping of the
Brazilian electrical equipment industry, in addition to the precariousness of working
conditions and the rise in long-term unemployment rates. No to privatization of
Eletrobras.
* Fernando Alcoforado, 78, holder of the CONFEA / CREA System Medal of Merit, member of the Bahia
Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the
University of Barcelona, university professor and consultant in the areas of strategic planning, business
planning, regional planning and planning of energy systems, is the author of 14 books addressing issues
such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The
Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific,
Economic, and Social Revolutions that Changed the World.